A blog dedicated to commentary, technical analysis, and the general machinations of the global gold and silver bullion markets with additional commentary on the global economy and related commodity markets.

Thursday, February 4, 2010

Joke Of The Day

The US Dollar is no more a safe haven than a fox hole is a safe place to hide in a nuclear war.

The US Dollar is a festering liability on the balance sheets of every central bank in the world.

Are central banks seriously dumping the Euro and replacing it with US Dollars? I find that difficult to accept. The US Government is on the cusp of debt default by the end of February as it's debt limit fast approaches. Yes the Senate has approved an INCREASE in the Debt limit by $1.9 TRILLION, and the House will attempt to follow with their approval shortly, but how does this make the US Dollar a safe haven? Is it "safe" because the Fed can just "print more money" to pay the tab? Hardly!

Treasury Expects to Hit Debt Limit in FebruaryThe Treasury Department said Wednesday it expects to hit the government's debt ceiling by the end of February, putting pressure on Congress to raise the limit from its current level of $12.4 trillion.

Treasury said it is working closely with Congress to raise the ceiling. The Senate has approved legislation to increase it by $1.9 trillion to $14.3 trillion. A ceiling that high would equal about $45,000 for every American. The House is expected to vote on the increase Thursday.

House Faces Tough Vote on $1.9 Trillion More DebtWASHINGTON (AP) -- Facing a politically excruciating vote, House Democratic leaders are counting on new budget deficit curbs to help smooth the way for a bill allowing the government to go $1.9 trillion deeper into debt over the next year -- or about $6,000 more for every U.S. resident.

The debt measure set for a House vote Thursday would raise the cap on federal borrowing to $14.3 trillion. That's enough to keep Congress from having to vote again before the November elections on an issue that is feeding a sense among voters that the government is spending too much and putting future generations under a mountain of debt to do it.

Is the Euro less safe because they refuse to just "print more money" to pick up the tab of floundering Euro states? The Euro zone is attempting to govern within the rules of its charter and is being punished? The US is governing via the printing press and counterfeiting currency to govern it's nation outside the rules of it's constitution and is being rewarded?

What is wrong with this picture?

I'll tell you what's wrong with this picture. One need look no further than the NY COMEX futures exchange and the "price" quoted for an ounce of Gold or Silver. The barometer of fiscal health has been silenced by a corrupt cabal of bankers colluding to hide the TRUTH about the US Dollar. That the crime of price suppression is allowed by government regulators to continue in futures markets designed by law to offer price "discovery" boggles the mind. Should this crime, and the government's collusion in it, ever be exposed and halted, the free world is sure to be turned on it's financial head and knocked unconscious. Perhaps drifting into a coma lasting more than a generation.

Lines of Gold and Silver investors are almost certainly forming outside of Urgent Care clinics as I write this. They will be seeking medical care for rape trauma. Gold is down over $35 an ounce and Silver over $1 an ounce on the "shocking" jobs data released this morning.

The US economy was handed yet another does of reality today when initial jobless claims once again were reported as "worse than expected". This "unexpected rise" is the fourth in the last five weeks. All coming in a financial media environment that has assured the public repeatedly that "jobs growth is imminent". The only thing growing in the jobs market is the number of chronically unemployed. The number of people receiving "extended" jobless benefits rose again last week by 200,000 to 5.8 MILLION. Not a very encouraging data point for those seeing an imminent growth in jobs.

The rise is the fourth in the past five weeks. Most economists hoped that claims would resume a downward trend that was evident in the fall and early winter.

The Labor Department said Thursday that new claims for unemployment insurance rose by 8,000 to a seasonally adjusted 480,000. Wall Street economists had expected a drop to 460,000, according to Thomson Reuters.

The four-week average, which smooths fluctuations, rose for the third straight week to 468,750.

As I have said many times in the past, as long as there is "hope", there can not be a bottom. Until all hope is lost, we are doomed to disappointment. This was not a glowing report by any stretch. Reporting the data as "unexpected" does not in any way polish this jobs data turd.

THERE IS NO SUCH THING AS A JOBLESS RECOVERY! That government mantra is the biggest load of bullshit festering in the financial media today. Where is the TRUTH?

The TRUTH is being raped and pillaged by a bunch of US Government sponsored thugs operating on the NY COMEX [disaffectionately known as the CRIMEX]. Until these criminals are brought to justice the country shall know no TRUTH. That is if there is any justice left in this country. People where is the outrage? Will justice continue to go unserved until lynch mobs walk the streets of Washington and New York?

This jobs data should have kicked the crutches out from under the US Dollar. Shockingly the exact opposite occurred. At the exact moment this "bad news" hit the headlines, the Dollar caught a bid as if it's tail had been lit on fire. The Precious Metals plummeted right on cue. Coincidence? Not likely. The headlines would have you believe that further distress in the Euro debt markets COUPLED with the poor jobs data has sent the Dollar higher, and the Precious Metals lower.

Funny then that the Dollar was relatively flat overnight in Asian and European trading, as were the Precious Metals. Euro zone debt issues are no secret over there, yet no one was running from the Euro and the Precious Metals in those markets today...until the US jobless claims were reported. How odd that. A cynic would suspect that the markets were being rigged by a cabal of bankers working with the US Government to hide the TRUTH. I'm sorry, but shouldn't obvious economic challenges of this nature "support" the price of Precious Metals and "pressure" the local currency? How does increased joblessness in a country that has falling tax revenues and rising deficits spark a flight to "safety" in the local currency. Surely news of this sort would expose a glaring weakness in that nation's currency and a negative reaction by the currency markets.

Look at Greece, reportedly a fiscal nightmare, and it's woes are deemed a colossal drag on the Euro currency with negative sentiment rampant in the currency markets because of a huge rise in costs to insure it's debt. Then look at California in the US, whose fiscal nightmare is exponentially worse than Greece could ever imagine, it's costs to insure it's debt rising quickly, unemployment among the highest in the nation, and the financial press ignorant of it's underlying effect on the US Dollar.

Forget Greece, California Bond Spreads Have Soared Back To Crisis LevelsMore bad news for California bondholders. Pimco expects yields on California debt to return to their highs from the state's fiscal crisis last summer, which would slam bond prices.

Credit default swaps have painted an ugly picture of credit deterioration as well:

Bloomberg: California’s credit default swaps, insurance contracts that are generally used to protect against default, have risen 97 percent since late October to $314,000 to protect an investment in $10 million of bonds. The state has $73 billion of general obligation debt outstanding, according to Treasurer Bill Lockyer, who has repeatedly dismissed any suggestion the state may not make required payments.

Too bad California can't print money like the US Government does. But it can't and neither can Greece. The Euro falls on fears that Greece may have to be bailed out buy European Central Bank. And the Dollar rises because there is no fear that the US Government may have to bail out California? And the Dollar rises because the US Government will have to print more money to give to the rising ranks of long-term unemployed? The absurdity of it all is giving me a migraine.Time to move on... Besides, what do I know about currency values, debt and interest rates.

Let's see what Eric Fry from The Daily Reckoning has to add to the argument:

The US government has amassed $1.8 trillion of new indebtedness during the last 15 months. Astonishingly, each and every one of the last 15 months produced a deficit, including the tax-collection month of April, which had produced a surplus for 26 straight years.

So how much is $1.8 trillion, anyway?

Well, let's see... It's about 13% of US GDP. $1.8 trillion is also about double what the IRS collected from all individual taxpayers last year. In other words, if every American taxpayer had simply agreed to double his or her tax payments last year, the nation could have avoided this whole deficit mess.

For one final bit of perspective, $1.8 trillion is more than double the total debt America had accumulated during its first 200 years as a nation. America's debt load did not crack the trillion-dollar level until after 1980. These days, we rack up 200 years worth of debt every six months or so.

Thus, from a purely mathematical standpoint, trillion-dollar annual deficits seem incongruous with 30-year Treasury bonds yielding less than 5%. Less than 20%, maybe.

The initiatives that are aggravating America's runaway budget deficits are so mindless and uncoordinated they are, to paraphrase White House Chief of Staff, Rahm Emmanuel, "profanely moronic." As these moronic initiatives pile trillion-dollar deficits atop one another, Treasury bond yields might go to 20% at some point...or the dollar might go to three euros...or both.

Let's see... Last I checked, Greece was thought to be in a financing pickle because they need to raise 53 BILLION Euros this year to remain solvent. This is a FAR CRY from the $1.6 TRILLION the US must raise this year. The crisis in Greece revovles around the rising cost of their debt. Greek debt is now yielding 7%. US debt is now ARTIFICALLY yielding just less than 5%. And the US is on the record of having to raise in excess of $2.5 TRILLION this year to meet it's debt obligations. Do you see where this is going? The US is facing a monumental debt financing crisis of it's own. Interest rates ARE GOING TO RISE. Rising interest rates WILL increase the costs of fianancing US debt. Just because the US can print money to pay it's debts does not make it's debt or it's currency safe.

The US Dollar is no safe haven. The US Dollar is a joke! And the joke's on you, the taxpayer.

The Case for Higher Treasury YieldsBy Dan Amoss, The Daily ReckoningI’m a bear on Treasury bonds. Prices should go down and yields should go up as the creditworthiness of the US government deteriorates. Right now, with the 10-year yield at 3.64%, investors are assuming that the future direction of inflation and budget deficits will remain under control. Treasury bond bulls will argue the following points about inflation, federal deficits, and the existing stock of Treasuries. I’ve listed the bullish consensus view in bold type. My responses, listed as the alternative view, will follow each consensus view:http://dailyreckoning.com/the-case-for-higher-treasury-yields-and-lower-reit-prices/

If PIIGS Could Fly [an excellent view of sovereign debt]by Niels Jensen“A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy…”Alexander Fraser Tytler, Scottish lawyer and writer, 1770

It was always naïve to believe that a crisis so deep and profound was going to go away with a whimper; however, an increase of more than 50% in global equity prices can be very seductive, and nine months of virtually uninterrupted gains have led many to believe that the problems of 2008-09 are now largely behind us

...the fate of global equity markets is very much in thehands of bond investors. Under normal circumstances, this is the besttime to be in equities. But these times are not normal, so do not expectthat the outstanding performance of 2009 will be repeated in 2010. Ifinternational bond markets calm down again – and that may happen,at least temporarily – equities can probably post further (but modest)gains in 2010; however, the end game is approaching. If bondinvestors do not revolt in 2010, they probably will in 2011, so playingthe economic recovery through equities is a dangerous game.

Gold has obviously failed miserably at attempts to stay above 1105. Silver obviously never had a chance to crack the wall at 16.73. Today, prices of both futher fail to represent fundamental reality. On that note I refuse to comment further on the Precious Metals.